Inventory control - 2018

Question 2: Consumption rate of an item is 50000 units/ month. Ordering and related cost is Rs. 1000 per order. The unit price of the item is Rs. 10. The rate of inventory carrying cost is 10% of average inventory value per month. The supplier offers a 20% discount in unit price of the item if the order quantity is more than or equal to 11000 units.

a) What should be the order quantity to minimize the overall cost?                                           3 marks

b) Rate of inventory carrying cost got increased due to increase in loan interest and cost of storage space. What will be the impact on economic order quantity?                                                     4 marks

Answers can be seen at

https://drive.google.com/file/d/1SfERvFW_1fp06Rp8mPnao6WUdLYx5IPB/view?usp=sharing